search query: @indexterm MINING INDUSTRY / total: 113
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Author: | Adam, T. R. |
Title: | Risk management and the credit risk premium |
Journal: | Journal of Banking and Finance
2002 : MAR, VOL. 26:2-3, p. 243-269 |
Index terms: | Risk management Securities Hedging Mining industry |
Freeterms: | Financial constraints |
Language: | eng |
Abstract: | The paper shows how the credit risk premium affects firms' optimal hedging strategies. The model predicts that if the credit risk premium is relatively small, firms use convex hedging strategies. Firms in between those two extremes use strategies that feature both convex and concave elements, e.g. collar strategies. Firms that are unlevered, invest little and are exposed to few non-hedgeable risks are the most likely to use linear approximations of the otimal startegy. The model replicates essentially all observed hedging strategies in the gold mining industry. |
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